The Pin Factory Blog

Sir Nicholas Wall, President of the Family division of the High Court, told The Times yesterday that the law about couples who cohabit should be changed so that unmarried couples have new rights about their shared property. This is currently dealt with using the law of trusts, which can often be deeply unfair on the woman. Financial contributions at the beginning can be determinative of the woman’s share later on – contributions such as childcare and domestic work are highly unlikely to gain the woman a greater share in the property. A married woman, on the other hand, will have statutory rights to a share of the money and property.

The courts have no power to order financial relief like they do in the case of a divorce, so these claims are crucial. However, they are complicated, uncertain, time consuming and expensive. All of this can be avoided by a simple “express declaration of trust” at the beginning of the cohabitation. But how many people even know what that is? The majority of people don’t even have a will.

This is not the first time the call has gone out to legislate in this area. The Law Commission considered it in 2006/7, but the government refused to legislate for fear of being seen to undermine marriage. There are three quick objections to this. First, the fact that in 1907 there were 644 divorces and in 2007 there were 128,232 means that marriage is already undermined. Second, government needs to be less concerned with what it is seen to be doing, and more interested in what it is doing.

The final objection is that the rights proposed for cohabiting couples are not the same as those granted to married couples or civil partners: they simply make it easier to reach a fair settlement. The Law Commission talked of two important conditions for bringing a successful claim. The relationship must be of a certain length and/or have produced children. It must also be demonstrable that the effect of contributions and sacrifices would otherwise be unfairly shared.

These two simple principles would be a much more just solution, and more practical. Two million people cohabit without marrying, and the 2001 census showed that 1,278,455 children were dependent on a cohabiting couple. 80% of the 18 – 25 group think it is acceptable to cohabit, compared with 30% of the over 65s. It’s here to stay and we need effective laws to govern it.

Whatever we think of the institute of marriage we shouldn’t allow those people, and their children, to be governed by outdated trust laws that confer significantly fewer rights than the law governing marriage. It is suggested in The Times that more than half of cohabiting couples believe they have a common law marriage: this is a myth, there is no such thing. What a better use of her time it would have been for Harriet Harman to pass legislation on this rather than her Equality Act, which adds such things to the statute book as:

A reference to an age group is a reference to a group of persons defined by reference to age;
A reference to a disabled person is a reference to a person who has a disability;
A reference to a person’s racial group is a reference to a racial group into which the person falls.

And my personal favourite:

Religion means any religion.

This could be the opportunity Nick Clegg needs to make a real difference to society. And married women across the land are unlikely to go to Westminster and set a police van on fire in protest. The leg work has been done by the Law Commission – all that’s left is the Clegg work.

The public consultation period on a new European contract law ended on Monday. But experts started drafting it in May 2010. Furthermore, the outcome of the consultation has already been decided: EU Justice Commissioner Viviane Reding stated that the 181 responses they had received were evidence of support for the idea, and added, as an afterthought: “...the Commission will now look at these replies before making a concrete proposal”. Mubarak could still learn a trick or two from the EU.

We need European Contract law like a fish needs a bicycle. Contract parties freely choose the law which governs their international contracts. The reputation of English contract law is such that it is chosen by millions of contracting parties all over the world. English law is the law chosen in 40% of contracts where disputes are the subject of international arbitration (New York law is next with 17%). There is no guarantee that English law will have this advantage forever; it is perfectly feasible that one day Chinese or Brazilian or Papuan Guinean law will be chosen. There is, in fact, a worldwide free market – the best law is chosen by parties according to their needs.

Introducing an optional model of EU contract law is but one of the options in the EU’s Green Paper. Other policy options are full harmonisation of national contract laws by means of an EU Regulation; and – wait for it – a full-fledged European Civil Code, replacing all national rules on contracts.

It is competition which shows us what works and what doesn’t – not harmonisation. This does not only apply to economic activity; it also applies to rules and regulations. And dire consequences from bad trading methods or laws are infinitely worse if they apply to more people and there is no escape.

Adam Smith's old home in Edinburgh, Panmure House, was bought recently by the Edinburgh Business School, who plan to spend £3m restoring the building to provide a scholar's library and a salon for public events. It's good that this fine building – currently very shabby from being stripped and used as council offices for thirty years – is to be restored and made accessible to the general public.

It is hard to provide modern access and facilities in a cramped 18th century townhouse. The Business School plans an external glass atrium housing a stair – solving the access problem with minimal impact on the historic structure. (See attached pictures.) I see no viable use for Panmure House without it.

But a government agency, Historic Scotland has (predictably) insisted that the plan goes to a public inquiry next month, saying the atrium is out of keeping. I have submitted my own support for the restoration. And friends from around the planet share that view. Here are words from a few of them:

Admirers of Adam Smith from around the world will be thrilled at the prospect of his last home being opened up to the public and to scholars. I very much hope that the innovative restoration plan goes ahead. – Nobel economist Gary Becker

As an Edinburgh graduate and frequent visitor to Edinburgh, I have long been dismayed at the state of Adam Smith's old home in the Canongate. Its restoration is long overdue, and I am hugely pleased that the innovative designs will make it accessible to the many friends of Adam Smith both in the UK and in many other countries. – Heritage Foundation President Edwin J Feulner Jr

I was honored to unveil the Adam Smith statue in Edinburgh in 2008, but dismayed to see the dilapidated state of his old home, Panmure House. Adam Smith was, after all, the father of modern economics, and it is marvellous to think that with this ingenious restoration, people from all over the world will be able to visit his Edinburgh home. – Nobel economist Vernon Lomax Smith

As beneficiaries of some of the greatest institutions and ideas of the Scottish Enlightenment, Australians and New Zealanders are especially mindful of the great contributions of Adam Smith. One of the most disappointing things about a visit to Edinburgh has been the poor state of his last home, Panmure House. The proposed restoration looks magnificent. I am sure that the restored house will attract many visitors from Australia and New Zealand and indeed from the many other countries that have gained so much from his legacy. – Greg Lindsay, Centre for Independent Studies, Sydney

Adam Smith's ideas were critical to freeing Estonia and other countries from Soviet domination, and he deserves better than for his home to be neglected and closed to the public. The planned restoration looks wonderful and I am sure it will attract many visitors from all over the world. – Mart Laar, former Prime Minister of Estonia

Adam Smith's old home, Panmure House, was always open to his many friends who wanted to discuss ideas with the author of The Wealth of Nations. It is well past time that it should be open to scholars and those who remain interested in these ideas. I very much welcome the plan to improve access to the public. – Leading Danish economist Peter Kurrild-Klitgaard

Karl Marx's worldwide followers can visit his house in London, and it is a shame that Adam Smith's house is not similarly accessible to his worldwide followers too. The proposed improvements look like a splendid way to make this house live again. The project is beautiful. I endorse the idea wholeheartedly. – Antonio Martino, former Foreign Minister of Italy

In terms of passenger use, the railways are enjoying a ‘golden age’. Figures earlier in the week showed that 1.32 billion passenger journeys were made last year. Not only was this figure well up on 2009 but it was also the highest railway use since the mid-1920s (if the 1939-45 war period is excluded).

Inevitably, this scenario begs the question as to how future rail demand levels can be met. In the long-term, the Government plans to modernise the network, with the c£34 billion High Speed 2 project being key. Initially, the latter is scheduled to run between London and Birmingham – and eventually to Manchester and Leeds. Since High Speed 2 is unlikely to be operational before 2026, other solutions should be explored.

Like many markets, the UK rail network suffers both from excess demand – packed carriages to London during commuting hours – and from inadequate demand – near empty carriages in some rural areas. The market should be allowed to make its own adjustments. This philosophy should be embraced – at least in part - by the planned franchise amendments. Longer franchises and more scope for the franchise holders to adjust to consumer demand are anticipated.

Much of the capacity concern focuses on both the West Coast and East Coast Main Lines, where trains are often very crowded. Why can’t these standard services run regularly throughout the night, with very cheap tickets being on offer which would be highly attractive to students?

By adopting a Ryanair booking policy, the 1am London Kings Cross to Edinburgh fare, for example, could be minimal – just like its fare to an obscure Polish city on a Tuesday in deep winter. At peak hours, market demand would ramp up fares. After all, many people currently fly during the night as well as visit 24-hour Tesco shops. Will 24-hour rail travel eventually become the norm?

The philosopher Jamie Whyte has made an excellent documentary for Radio 4 on the current revival of the Austrian school, embedded below. There's no doubt that the Austrians have made a huge comeback since the financial crisis, and prime time exposure on Radio 4 is an big step towards success.

Australian Prime Minister Julia Gillard says she will introduce some 'temporary' tax rises to pay for the country's flood damage. And in the UK, the BBC World Service is closing a sixth of its world language services, firing journalists and mothballing transmitters.

Two unrelated stories, you might think, but they show the real problem that liberals have in holding back – never mind reversing – the seemingly unstoppable growth in government.

If Julia Gillard wants to find money to pay for flood damage, why does she not do what the rest of us do in such circumstances? When the rest of us face some domestic emergency, we just have to grit our teeth and cut back somewhere else to find the money. Why is government's answer to every expensive problem a rise in taxes? Why is it not a reduction in less urgent spending elsewhere?

And isn't it amazing that the answer to a 16% cutback in the World Service cutback leads to large chunks of the service being axed completely. Let's not forget that 300 BBC executives were recently exposed as earning more than the Prime Minister. Why not get rid of some of the back-office fat instead of axeing the front-line services?

Short answers only, please.

On the blog this morning, Philip Salter cited a paper by Alberto Alesina and Silvia Ardagna of Harvard University which concluded that an economic 'stimulus' of tax cuts was more likely to boost growth than one based on greater government spending. I will tell you why.

First, tax cuts boost business everywhere. Employers who are struggling to pay their bills (including national and local taxes), are not likely to think about hiring more people. But a tax cut would make a crucial marginal difference to them. And remember: if every small business in the country had the confidence to hire one extra person, unemployment would be zero. A tax cut is both general and quick in its effect. Government spending, however, is not general. It is concentrated in sectors like road building and bureaucracy. It takes time for spending in the former to trickle out to the rest of the economy; and as for spending on the latter, well, we have too much of that anyway.

Spending programmes also take time. It can take years for road, rail or runway schemes to get off the drawing board, through the planning process, and then into construction. Indeed, given the record of past government projects, there's a good chance that any crisis will be long forgotten by the time the spending actually starts.

The other way of boosting government spending is to raise transfer payments – raising welfare or pensions, for instance – does give a fairly widespread boost to a lot of people. But while it is very easy to boost welfare spending, it is nigh impossible to cut benefits again when the economy has righted itself. So you just end up increasing government welfare spending over the long term, which isn't likely to make your economy any more dynamic.

And where is the money for any sort of government spending to come from? If it comes from higher taxes, that depresses business and employment all round. If it comes from increased borrowing, that just monopolizes investment funds that could have gone to – more productive – private businesses. And it adds to the debt and to the interest payments that burden taxpayers.

Sure, a tax cut might produce a short-term cut in government revenues that has to be funded, too. But the higher your taxes are, and the deeper you cut tax, the greater and quicker the stimulus. It also helps if people figure you really mean it and aren't going to raise taxes again. We don't need more government spending, and we don't need piffling schemes to 'encourage' employment. We need tax cuts, and a commitment to a low-tax future, and we need them now.

On Bloomberg.com former MPC member David Blanchflower argues that the 'Conservative austerity idea is failing'. The former external member of the Bank of England’s Monetary and Policy Committee (MPC) suggests that the coalition government is driving the economy into another recession. Yet despite the confidence with which he asserts his prediction, Mr Blanchflower does not have a crystal ball. Of course, we might indeed experience two successive quarters of negative growth, but likely not for the reason put forward in this article.

Despite his academic credentials, Mr Blanchflower is a political beast – and his analysis reads as such. His thesis is built upon his belief that tax cuts – or even the thought of tax cuts – will cause a double-dip. But Keynesian obfuscation on the animal spirits doesn’t really get us anywhere. As much as the coalition government’s rhetoric and policy proposals of tax rises and cuts might be worrying consumers and businesses, the previous government’s head-in-the-sand deficit denial was also causing uneasiness. Let’s not forget that the hawks were circling around UK government debt. When politicians have brought your country to the point of bankruptcy and central bankers are ignoring the inflation eating away at your wealth, lacking confidence is a pretty natural reaction.

So rather than coming in on the side of whether the disease or the medicine leads to the greater loss of confidence, better to focus on what works. Luckily, Alberto Alesina and Silvia Ardagna of Harvard University have done the hard work. In a 2009 paper entitled ‘Large changes in fiscal policy: taxes versus spending’ they conclude that:

Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions.

The paper is worth reading in full as it is comprehensive in scope, has a simple and convincing methodology, and comes to the unequivocal conclusion that tax cuts trump spending. Confidence is a tricky policy lever to pull, one based on facts tends to be much more successful.

Today is the final day for the Lords to retain its status as a self-regulating chamber. Without an agreement about how to proceed with the constituencies bill, ministers are going to impose a guillotine on the House of Lords. This would set a dangerous precedent: the delaying tactics currently at work, although unconventional themselves, can be useful to ignite public debate, bring to light bad drafting, and generally keep the government on their toes.

Giving ministers – not the Commons, but ministers – the power to curtail procedure in the House of Lords is another expansion of the executive at the expense of the only real scrutinizing chamber we have. Far better would be to split the bill, pass the referendum, and then negotiate about concessions for the constituencies. If not agreement is met with the Parliament Act can be used: that is an already tarnished procedure. There will be unexpected consequences of allowing a guillotine in the House of Lords – it will allow future governments to shortcut the Parliament Act, potentially not allowing the Upper Chamber to voice their concerns in a debate. The level of political debate in the media is already woeful, we should not be encouraging the same thing in parliament.

The government has also given the police new powers (they really didn’t have enough powers, did they?) that allow civil injunctions to be used on possible gang members. They would involve a curfew and, if broken, time in prison or a fine: all on the civil burden of proof, not the criminal burden. This is not a serious attempt to curb crime, it is a political gesture. Apart from the obvious fact that banning things doesn’t work, this is just another rebranding exercise. Control orders become T-Pims, ASBOS become injunctions.

Cameron really is the heir to Blair – the executive slowly accrues power over parliament, the House of Lords is mishandled and managed, and draconian powers are introduced in law enforcement. Perception is prioritized over fact, spin and double talk is used instead of informed debate